China's 'State Capitalism' Sparks a Global Backlash … Since the end of the Cold War, the world's powers have generally agreed on the wisdom of letting market competition—more than government planning—shape economic outcomes. China's national economic strategy is disrupting that consensus, and a look at the ascent of solar-energy magnate Zhu Gongshan explains why. A shortage of polycrystalline silicon—the main raw material for solar panels—was threatening China's burgeoning solar-energy industry in 2007. Polysilicon prices soared, hitting $450 a kilogram in 2008, up tenfold in a year. Foreign companies dominated production and were passing those high costs onto China. Beijing's response was swift: development of domestic polysilicon supplies was declared a national priority … Today, China makes about a quarter of the world's polysilicon and controls roughly half the global market for finished solar-power equipment. – Wall Street Journal

Dominant social theme: China derives too many advantages from state-controlled capitalism. The West must reluctantly adapt.

Free-market analysis: We have been covering what we believe is essentially the demise of China as it currently exists because we think inflation is raging virtually out-of-control in that big country. We know some (or even many) may disagree with our perspective and certainly the timeline is always in doubt. The Chinese economy presumably could collapse tomorrow or continue onwards with increasing success for another 10 or 20 years. In any event, given what we perceive on the horizon, stories like the one above are puzzling to us. For us, there is increasingly less difference between how Western business operates and how business in China takes place. The "advantage" of Chinese state capitalism as expressed in the excerpt above is increasingly insignificant as industrial methodologies converge.

The so-called differences between Chinese and Western business is increasingly a kind of dominant social theme in our view, one intended to present the perspective that private-market capitalism is under attack from a more brutal form of "state"-capitalism. The perception, then, is that the West's laissez faire approach to private enterprise is endangered and must be protected. Westerners, in other words, should appreciate what they have. This is in fact an effort to defuse criticism that the West is becoming too authoritarian and too statist. Look there – we are told – China is far worse, though perhaps more efficient. Here in the West we are devoted to our freedoms and will never go down the Chinese road.

We have covered this particular meme before in several articles, noting that promotion has been enshrined in books and articles that postulate the 21st century will focus on a confrontation between these two kinds of capitalism as operated by the West and China. Within this paradigm, the West's market capitalism is to be presented as a precious and endangered commodity compared with the brutal efficacy of the Chinese state model. We have also pointed out that nothing could probably be further from the truth. If the pioneer of state capitalism was Germany, then the inheritor of the German model has certainly been the larger West, including America and the EU. When one examines how capitalism works in the West in the 21st century, one is struck by the amount of government involvement and general "bigness." This is in no way dissimilar to the Chinese model.

How has corporatism evolved in the West? In the past, we've discussed the idea that the corporation itself is an artificially manufactured entity and that, absent the current statist judicial system, corporations would not exist. What would be in place instead would be alliances of smaller companies (owned outright by individuals or partners for the most part), as well as joint-ventures that would do the work now taking place under one roof. These flexible alliances would be a good deal more cost efficient and scalable. They would allow for the kind of innovation and competition that the current, rigid corporatist structure (in the West) currently does not.

When one examines Western capitalism, one continually comes to the conclusion that it has evolved away from entrepreneurialism and private markets and that this evolution is accelerating. While the Western model and especially the American model is complex, the statist bent is increasingly notable and has been for a while. Western governments may not fully own the means of production but they set the private market agendas of the businesses that operate within their boundaries. We can see this clearly – and most recently – in the announcement that GE is going to buy 12,000 Chevy Volts from General Motors, as reported recently in Forbes magazine:

This Is How Change Happens: GE To Buy 12,000 Chevy Volts … GE says it will buy 25,000 electric vehicles, including 12,000 from General Motors, starting with the Chevrolet Volt in 2011, to help lead the way toward widespread adoption of electric vehicles. GE plans to replace half of its 30,000-vehicle corporate fleet with EVs and will deploy another 10,000 electric vehicles for customers through its global fleet management business. The company says it will start by purchasing 12,000 vehicles from GM, and then buy additional EVs from other manufacturers as they become available. The company plans to try a mix of plug-in technologies, depending on its specific needs.

"Electric vehicle technology is real and ready for deployment and we are embracing the transformation with partners like GM and our fleet customers," said GE Chairman and CEO Jeffrey Immelt. "By electrifying our own fleet, we will accelerate the adoption curve, drive scale, and move electric vehicles from anticipation to action." GE, of course, has a vested interest in the shift toward electric vehicles. It sells vehicle charging stations, circuit protection equipment and transformers that are key elements of the infrastructure needed to support electric vehicles. It also has a partnership with California-based Better Place to offer financing for battery purchases for Better Place's battery exchange stations and is a major shareholder of battery maker A123 Systems. GE also has interests in smart-grid and power transmission technologies as well as the wind and solar energy industries."

This story has the fingerprints of GovBiz (to coin a term) all over it. Of course to analyze it one has to begin with the Anglo-American power elite itself, which sets the larger promotional agenda. When it comes to what is occurring with GM, the course of events is fairly clear and has to do with an effort to promote a "green" corporate agenda. To this end, GM (rescued from bankruptcy by the US government) has begun to pursue an aggressive environmentally conscious business plan. We can see from the Forbes article that GM is not just producing electric cars but is also heavily involved in numerous green business offshoots.

One could, of course, make the argument that all this makes sense, but we don't think so. We don't see an exceptional level of private demand for wind farms and solar energy – both of which come with plenty of drawbacks. When it comes to GM's fascination with electric cars, we find ourselves even more skeptical. It doesn't make sense on a number of levels, beginning with energy generation which has now takes place at coal-fired plants that produce the electricity that Volts need. One has essentially taken a step back from clean-gas burning cars to coal plants that may indeed be "dirtier" for the environment.

But perhaps GM's new businesses are not about commerce, but are about realizing GovBiz command-and-control agendas. It has do (at least in part) with something we've written about before called SmartGrid. This is a flexible and fungible, home-installed facility that allows power companies to keep close track of a person's electrical consumption and even to control that consumption from a third-party location. We would argue that the powers-that-be are most anxious to implement SmartGrid, which is indeed being installed in various Western and third-world nations as we write.

Another reason that the powers-that-be want cars to convert to electricity from gas is because electricity is inherently a more limiting resource. Absent power stations and plug-ins, people simply cannot travel too far. Electric cars are great in an urban environment but they will tend to restrict people's mobility. As Western countries turn increasingly authoritarian, one can see efforts being made to reduce or at least limit people's ability to travel freely over large distances. We would argue that this is one of the outcomes of the "war on terror," which is discouraging people from flying because of the increasingly invasive security regime.

To really understand the growing interactions between Western business and government, one has to deal with the agenda of the Anglo-American power elite itself. This tiny, powerful and fabulously wealthy group of intergenerational banking families is interested in creating what has been called a New World Order. It uses mercantilism – the ability to translate self-interest into law – to centralize and expand world governance. Part of the elite's agenda has to do with exercising increased control over people's lives and living arrangements, and environmentalism has been the chosen tool for this task.

Environmental protection provides an endlessly flexible rationale for increasing government throughout the West (and around the world) and also for creating "private public partnerships" such as those we see between the US government and GM. It allows governments (under the control of the elite) to create an endless supply of laws and regulations meant to (eventually) control every aspect of society and people's behavior. Business itself is bent to this purpose through tax incentives and various forms of funding both private and public.

Within this context, then, we can understand GM's affinity for green businesses. And insofar as this deal with GE is concerned, one can see clearly how Western GovBiz works. GE is a main supplier of expensive military items to the US government and is thus quite amenable to the US government's larger agenda, whatever it might be. If BigGov wants GM electrical cars to seem popular, GE stands ready to help by purchasing a bunch of them. Of course it is not just BigGov; it is actually the larger agenda of the elite being carried out by the US government (and other Western governments as well).

There is little difference that we can see at this point between Chinese state capitalism and the American free-market variety. We know this is perhaps a cynical view, but large Chinese companies likely perform their functions at the behest of the state and American business is similarly controlled, or at least the larger enterprises are. The control extends to the stock market itself as many institutional buyers are funded by Western power elites and thus are going to make investments in elite businesses.

After Thoughts

GM is getting ready to raise money once more (a lot of it) and apparently the effort is attracting positive attention in the larger marketplace. Now we wouldn't buy stock in a company that had made a commitment to green business and clunky electrical cars that travel only a small distance on a single charge and have to be recharged for many hours. But in the West (and especially in America), this sort of enterprise commands attention – and investments. To us, this is not a natural occurrence. But, then, we would argue that big business is not about what's practical for the market anymore. It's about what conforms to the command-and-control agenda of the Western power elite. That's not much different than China.